Back To School: It's Difficult Finding Good Used Cars For Students

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September 6, 2011

The current shortage of used cars is making it challenging for parents to find reasonably priced vehicles for their sons and daughters as they head back to school. A perfect storm of circumstances has effectively siphoned off low mileage, fuel-efficient, and inexpensive pre-owned vehicles from the market place. The result has families putting in extra time to find vehicles that will get students to and from high school, or a vehicle for college.

A perfect storm

First, Cash for Clunkers literally swept 700,000 used cars off the market in 2008 and 2009. Many of these vehicles weren’t actually ready for the junkyard and could have been resold to eager buyers. The second storm front to hit the U.S. car market was the economic downturn. It resulted in three major consequences for used car buyers:

1. It reduced the number of new cars sold, which drastically cut the number of trades available for resale. Because most dealers rely on profit from their used car operations to stay in business, it forced them to find cars elsewhere, including wholesale auctions. The result: prices at wholesale auctions rose as supply dropped, putting even more pressure on retail prices.

3. And it meant that car owners had less money for their next vehicle purchase. The result was an inability to buy new or high-end, more expensive, pre-owned vehicles. Instead, Americans have been settling for less expensive models in each category. The result: demand for cars under $10,000 sky-rocketed, forcing prices of these inexpensive vehicles up $1,000 to $3,000.

The third major factor to affect the used car market was skyrocketing gas prices. The very cars that parents wanted for their kids were being scooped up by average families as they downsized from SUVs, trucks, mini-vans, and gas-guzzling sedans.

What to do

The primary concerns parents have when buying a second-hand vehicle for their son or daughter are selling price, safety features, and maintenance costs. At least that was the case when I was actively selling cars for a major dealership.

How do you find a safe car in your price range where the vehicle’s upkeep won’t break the bank? Part of the long range cost of any vehicle is how much gasoline it's going to burn. Be sure to check gas mileage at FuelEconomy.gov. Use another government website for safety information at SaferCar.gov.

What about pricing used cars? Kelly Blue Book is always a good place to check for pre-owned values. Be sure to use the "private party" valuation unless you're buying from a dealer. The private party valuation is the actual price that year of vehicle with those miles should sell for in your local area. If buying from a dealer use the "suggested retail" price. This is the dealers selling price before negotiation. And try to be accurate with the condition of the vehicle in question. KBB uses "excellent," "good," or "fair."

There are two other steps that used car buyers should take to make sure they are protected. First, run a vehicle history report. Use AutoCheck or Carfax to make sure the vehicle was never in an accident, a flood or natural disaster, had odometer issues, or has a salvage title.

Second, ask to see the mechanic's inspection report if buying from a dealership. If you are buying privately, have a mechanic lined up to perform a pre-purchase inspection. This report will cost around $100 but is well worth the money. It will not only let you know of hidden problems, but you'll know in advance if any work needs to be done over the next few months. Use this information in the final price negotiations. For example, if the car you want to buy your son or daughter needs $800 in brake work and new tires, ask to at least split the difference with the seller where they come down in price $400.

If a dealer won't let you see the mechanic's report, don't take them at their word that the vehicle is in good mechanical condition. Ask if you can take the vehicle to your mechanic. If they say no, walk away and find a vehicle that you can confirm is in good condition.